The Government Sponsored Entities (GSE), Fannie Mae and Freddy Mac, are the second and third largest borrowers in the world, with the federal government being #1, and it appears that they are in trouble.Fannie, Freddie plunge on reports of feds planning bailout – Jul. 10, 2008

well, former St. Louis Federal Reserve President William Poole just said that the GSE’s are insolvent under fair accounting rules.

If they go boom, it’s not hoard gold time, it’s hoard canned goods and ammunition time.

This may sound alarmist, but the credit markets are already demanding the highest spread from Treasury debt ever, 74 basis points, and White House officials are drawing up contingency plans in the event that one or both of them fail, so Pool is not alone in his concerns.

We haven’t even made to the 7th inning stretch in the credit crunch.